On 1 December 2017, HMRC published a summary of responses to their consultation “Tackling offshore tax evasion: A requirement to notify HMRC of offshore structures", which closed on 27 February 2017.

The consultation was about imposing additional reporting obligations on “enablers” who create “complex offshore financial arrangements that assist in tax evasion” and the proposals target arrangements that

  • Fall outside DOTAS as they don’t have any tax impact if the taxpayer properly declares taxable income and gains.
  • Can be used for tax evasion purposes by making it difficult to identify the taxpayer as the beneficial owner.

At a glance

  • Intermediaries who create or promote arrangements which meet certain characteristics will have to notify HMRC of the details.
  • Intermediaries will also have to provide HMRC with a list of clients who are using the scheme.
  • HMRC will provide the intermediary with a notification number to be passed on to clients.
  • Clients will have to include the notification number on their Tax Return or Personal Tax Account.

The proposal is intended to target offshore arrangements which are designed to assist the evasion of tax by making it difficult to identify the beneficial owner of income and gains.

Replies

There were 19 respondents, of whom 9 were professional bodies or other organisations.

Many respondents believed that the measures outlined within the consultation would be more effective if implemented multinationally, rather than as a purely UK measure. It was particularly noted that it would be hard for HMRC to enforce any measures on non-UK residents and ran a risk of putting the UK at a competitive disadvantage.

Overall, there was broad agreement with the principles and high level aspects of the consultation. However, concerns were expressed about the finer detail.

  • It would be hard to design “hallmarks” that would catch potential evasion while minimising the compliance burden on “legitimate” arrangements. The majority of respondents indicated that they would prefer objective hallmarks, to subjective tests.
  • A recurring theme was the idea that any arrangement could be used for evasion
  • It was thought that a notification number could be viewed as implying the arrangements could be used for evasion, with the associated negative connotations. Alternatively, it was suggested that once an arrangement had been “endorsed” by HMRC evaders would switch approach, so only compliant taxpayers would bear the burden of reporting.
  • Only five respondents thought the requirements should be limited to individuals
  • It was thought that requiring reports on existing structures would impose a significant burden on the advisory industry. Only one reply suggested that existing arrangements should only become reportable under specific circumstances.

Government Response

Following the above consultation, both the OECD and EU have worked on multinational arrangements similar to those suggested. The Government will, therefore, be working with these bodies to create internationally binding rules, taking into account the responses received.

Links:

The summary of responses can be found here.

Our Guides:

Consultation: Notifying HMRC about offshore structures

DOTAS: Disclosure of tax avoidance schemes

Penalties: Offshore income and CGT

Offshore Evasion: Requirement to Correct

Finance Act 2017: tax update and rolling planner

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